What does the Premier League’s decision to authorise the display of sleeve sponsor branding for the 2017/18 season onwards actually mean?
Shirt sponsorship in ‘the beautiful game’ is far from an original idea; however, England’s top flight clubs have never before been in a position to sell a 100cm2 area on the left sleeve of their kits to commercial partners for a premium. This revenue source has bolstered the coffers of Europe’s other elite leagues (most notably Spain’s La Liga) for a number of years and from next season onwards the Premier League will have a piece of the action.
Independent research calculates that the average value of the new sleeve sponsorship opportunity is worth an estimated additional £3 million per season in revenue to each Premier League club. Clearly those teams at the summit of the table will be in a position to command considerably more than the £3 million figure from their commercial partners.
Unsurprisingly it is the ‘new money’ Manchester City which has struck first in the race to secure a sponsor for the latest piece of shirt ‘real estate’. Ferran Soriano announced on the 17th March 2017 that Nexen Tire’s logo will be emblazoned on the left arm of the Citizens first team from the 12th August 2017 onwards in a deal worth an estimated £5.4 million per season to Sheik Mansour’s team.
Outside of the Premier League’s ‘Big Six’, 10 of the 14 clubs have a betting/gambling company as their front of shirt sponsor. Whilst the worldwide reach and reputation of the Premier League is arguably at a level never seen before, mid and lower table clubs are unable to charm global players like Chevrolet (£53 million per season – Manchester United) Yokohama (£40 million per season – Chelsea), Emirates (£30 million per season – Arsenal) and Standard Chartered (£25 million per season – Liverpool) into parting with their sponsorship cash.
Sporting Group International is purportedly close to announcing a deal with eight clubs outside the ‘Big Six’ to sell their sleeve rights to a large commercial sponsor. The extent to which this as yet unnamed partner is a betting company remains to be seen. However, betting/gaming companies have the forefront of their sponsorship considerations brand exposure. Whilst they are not arguably blue chip brands selling exclusive products or services, football provides these sponsors an effective mechanism to increase sports betting revenues from its captive fan base.
Evidently the new sponsorship opportunity has the potential to generate large further revenues for England’s top flight clubs, though they will have to tread carefully in respect of exclusivity and overall sponsorship valuation:
Exclusivity: All clubs already have in place agreements with an existing front of shirt sponsor. Subject to the exclusivity provisions of these agreements clubs may be prevented from granting the new sponsorship rights on their sleeves to third party sponsors (especially ones in the same sector as the front of shirt sponsor). Clubs will need to examine the respective revenue generated per season from the main sponsorship and compare it with the fact that the sleeve sponsorship figure is only likely to generate approximately 20% of the front of shirt sponsorship amount per season.
It is highly unlikely that we will see clubs terminating these existing agreements completely unless they can find a sponsor who is prepared to take the full package on offer (front of shirt and sleeve).
Overall Sponsorship Valuation: To maintain maximum commercial revenues clubs must take an overall view of all sponsorship assets available to them. Whilst appointing a sleeve sponsor may provide a short term enhancement for clubs, multi-sponsor branding in the long term could result in an overall reduction in revenues. Sponsors may potentially deem their respective commercial positions to have been diluted given the influx of new sponsorship. Clubs will therefore be required to consider the effect that introducing a new commercial partner will have upon their existing sponsor relationships.
Conclusion – innovation in football
In 1979 Liverpool’s £100,000 two season deal with Hitachi was a major innovation as the Reds were the first club in English football to display a sponsor’s logo on their kit.
Nearly 40 years on, this is the first opportunity England’s top flight clubs have been provided to display additional sponsorship on their kits. Whether the Premier League is heading down the route of Formula 1 type advertising remains to be seen.
In summary, don’t discount the possibility that in 40 years’ time the kits worn by our favourite Premier League stars may look (from a commercial prospective) not too dissimilar to the racing suit worn today by Lewis Hamilton!
If you are a football professional or agent who would like advice, please contact Michael, one of our commercial experts.